The global financial markets experienced a turbulent night, with the US Federal Reserve's (Fed) hawkish stance taking center stage. The Fed Chair, Kevin Warsh, unveiled a policy statement that emphasized solid growth and a stable labor market, but also highlighted the elevated uncertainty stemming from the Iran conflict. This shift in tone sent shockwaves through the markets, with the S&P 500 tumbling from breakeven levels and all three major US indexes finishing near their worst levels.
One of the most notable impacts was on interest rates. The US 2-year yield jumped 13 basis points to 4.18%, the highest since February 25th. This surge in yields, coupled with a stronger dollar, put downward pressure on equities and commodities. The US Dollar Index rose 0.8% to 100.3, but remained mostly range-bound. Gold, a traditional safe-haven asset, snapped its four-day win streak and fell 1.7% overnight, while Brent crude slid for a fifth straight session to about US$78 per barrel, a three-month low.
The Iran-US peace deal, set to be signed in Geneva on Friday, has been a major talking point. The draft Memorandum of Understanding (MoU) includes reopening the Strait of Hormuz, a $300 billion economic package, and immediate oil sanctions relief. However, the deal is not final, and US President Trump has threatened to 'drop bombs' on Iran if he doesn't like the final agreement. This uncertainty has added to the market volatility.
In the ASX 200, Emeco guided FY26 operating EBITDA of $290-295 million, down from the estimated $315 million. PMET advanced on its on-site lithium refining strategy, while Washington H. Soul Pattinson plans to divest certain Brickworks assets to Goodman JV. The broader market sentiment, however, remained cautious, with most resource-related ETFs and sectors like Homebuilders, Software, and Airlines experiencing declines.
Looking ahead, the markets will be keenly watching the Bank of England's (BoE) interest rate decision, scheduled for 9:00 pm AEST. The BoE is expected to hold rates at 3.75%, but any surprises could impact the markets further. The Fed's hawkish stance and the Iran-US peace deal uncertainty have set the stage for a volatile week ahead, with investors navigating a complex landscape of geopolitical and economic factors.
